Multifamily Developers Hampered by Regulation-Related Costs: NMHC

New research shows the heavy toll bureaucracy takes on development projects.

More than 40 percent of multifamily development costs derive from regulations imposed by all levels of government. That’s the finding of a new report released late last week by the National Multifamily Housing Council (NMHC) and the National Association of Home Builders (NAHB).

Developers are subject to regulations that can include zoning requirements, building codes, impact fees, permitting requirements, design standards, public land requirements and federal Occupational Safety and Health Administration regulations, as well as other labor requirements.

Infographic courtesy of NMHC

“At a time of soaring demand and costs, it is disheartening that an average of 40.6 percent of development costs are attributable to government regulations,” Caitlin Walter, NMHC’s vice president of research, told Multi-Housing News. “We desperately need more housing of all types in communities across the country. The public and private sectors should work together to streamline bureaucratic processes and reform unnecessary regulatory regimes to reduce the cost of housing.”

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The new research was based on a survey of 49 developers across the U.S. The study also probed regulations and other factors affecting whether development even occurs. Three quarters (74.5 percent) of respondents said their proposed developments ran up against NIMBY opposition, which tacked on an average 5.6 percent to total development costs and delayed construction of new properties about 7 and a half months on average. Last month, an NMHC survey found apartment demand and cost of capital were both on the rise.

Regulations fill crucial roles in safeguarding Americans’ health and well-being. But a number of requirements, including design standards, extend far beyond what is essential, according to NMHC. They levy expensive sanctions on developers, eventually helping to propel housing expenses northward. Other regulations are redundant, needlessly expending resources confirming compliance with multiple regulators, the organization wrote in the report.

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